Huawei sanction may hit Safaricom

The US’s blacklisting of Chinese tech giant Huawei could potentially filter through to the Kenyan market due to the high exposure by government and leading telcos to the firm’s equipment, a local investment bank has said.

Standard Investment Bank says in a topical note on Safaricom that the Huawei ban is likely to have an impact on future smartphone sales, and in the long-term would also make network equipment more expensive because it could reduce the number of suppliers in what is already a small pool.

SIB says although the Huawei issue is still developing, concern is on whether Safaricom’s British parent firm, Vodafone, will look to take a similar position as its US counterparts on dealing with Huawei.

“Whereas Safaricom maintains it has a dual-vendor network, Huawei is the bigger supplier to Nokia by our estimation, potentially presenting a material risk,” said the SIB report.

“We see an impact on future sales of smartphone and network equipment, especially if support for some of the core services used in the Kenyan market such as Google (Android, Google Play Store Services, Security, YouTube, Gmail, Drive.) is applied.”

Safaricom had a network expansion and maintenance capital expenditure of between Sh35 billion and Sh39 billion in a financial year.

SIB notes, however, any restrictions on Huawei equipment will apply in future rather than historical investments, which will mean lower risk of heavy investment to potentially replace existing networks.

The government could also potentially find itself at a crossroads on the issue, having only recently signed a Sh17.5 million deal with China for the Konza data centre, which will be led by Huawei. The State also uses Huawei security equipment.

“Kenya, as with most African countries, has really never had to deal with the complication of sanctions from the United States in the way this directive on Huawei may impact the country,” say SIB.

Huawei has been fighting claims that the action by the US will affect its business in other countries.